KOSID: The new tariff structure proposed by ERO impairs business and household consumers

Prishtina – March 27, 2017 – Kosovo Civil Society Consortium for Sustainable Development (KOSID) and the Institute for Institute for Development Policy (INDEP) organized a roundtable with citizens and businesses to discuss the new tariff structure proposed by the Energy Regulatory Office (ERO). The roundtable elaborated on the impact that will have the amendments proposed by ERO on the energy price for the family and commercial sector, with a focus on small and medium-sized businesses, as well as the potential impact on the overall energy demand.

Representatives from the INDEP and KOSID presented an analysis which they have developed taking into account the proposed structure, which foresees removing seasonal tariffs and block tariffs and maintaining high and low tariffs (day and night).

Dardan Abazi from INDEP said that the removal of seasonal and block tariffs is an enormous change that affects the consumers’ pocket but also in their behavior towards energy consumption. "We argue that the proposed new structure increases the price of energy for the vulnerable category of the society who because of the lack of financial conditions they stay attentive to save electricity. ERO has not been sincere to show that the poorest categories of society will suffer the most from the tariff changes. Also, the new tariff structure does not provide incentive measures for small and medium businesses, a large part of which carry out their business activities mainly during the summer months - and with the new tariffs is expected that for a large proportion of businesses there will be an increase in electricity bills,"- said Abazi.

Whereas, Ymer Fejzullahu, Head of the Department for Tariffs and Prices at ERO, said that in the proposing document of ERO, the main principles of the new structure proposed are listed, clarifying the reasons for the proposed alterations. “The main principles regarding the design of the tariff structure intend for the electricity tariffs to be reasonable, transparent, understandable, to reflect costs, and encourage efficient consumption. In this manner, the proposal made will also be made intelligible, but also reasonable which would clearly reflect the costs and promote efficiency. Also, the proposed new structure is aimed at adapting the sector to the new circumstances created by the legal requirements for market liberalization and harmonization with the third package of European legislation. However, the proposal on the structure is not a decision that has been taken, as it is in the public consultation, but it contains the main components which the simplification of the current structure and the encouragement of the efficient use of energy during its peak and off," said Fejzullahu.

KOSID’s representative, Rinora Gojani, said that ERO should review this proposal and not change the current electricity tariff structure. Gojani stated that: “Eliminating seasonal tariffs at the time that we are entering the summer season, harms the family customers, and those of the business sector as well. The tariff structure and its change is being done in contradiction with the principle of stimulating energy saving, taking into account that the structure of the blocks, in the absence of the efficiency fund, remains the only financial tool for encouraging energy saving. So, this new proposed scheme is encouraging for consumption while discouraging for the promotion of energy efficiency. Also, the elimination of the seasonal tariff comes with the risk of the import with more expensive tariffs - although it is known that the current import price is twice higher than the export price.”

The roundtable was followed by a discussion from the participants, concluding that the new tariff structure proposed by the Energy Regulatory Office is being done without a clear analysis of market needs and costs that the change will bring for different categories of consumers. Based on the discussions made at the roundtable, such important changes should be accompanied by broader discussions and a clearer analysis of the costs.